Question

Lowell Company makes and sells artistic frames for pictures. The controller is responsible for preparing the master budget and has accumulated the following information for 2017. Estimated unit sales Sales price per unit Direct labor hours per unit Wage per direct labor hour January February March April May 10,200 11,300 8,700 9,000 8,800 $50.10 $47.20 $47.20 $47.20 $47.20 2.1 2.1 1.7 1.7 1.7 $8.00 $8.00 $8.00 $0.00 $9.00 Lowell has a labor contract that calls for a wage increase to $9.00 per hour on April 1. New labor-saving machinery has been installed and will be fully operational by March 1. Lowell expects to begin the year with 18,110 frames on hand and has a policy of carrying an end-of-month inventory of 100% of the following month's sales, plus 70% of the second following month's sales. Prepare a production budget for Lowell Company by month and for the first quarter of the year. LOWELL COMPANY Production Budget For the Year Ending March 31, 2017 - Jan Feb Mar Sales in Units 10200 11300 8700 Add : Desired Ending Inventory Total Materials Required Less : Beginning Inventory Required Production Units e Textbook and Media

Answer 1

1
Production Budget
For the Quarter Ending March 31, 2017
	Jan	Feb	Mar	Quarter
Sales in Units	10200	11300	8700	30200
Add: Desired Ending Inventory	17390	15000	15160	15160
Total Needs	27590	26300	23860	45360
Less: Beginning Inventory	18110	17390	15000	18110
Required Production Units	9480	8910	8860	27250
2
Direct Labor Budget
For the Quarter Ending March 31, 2017
	Jan	Feb	Mar	Quarter
Production in Units	9480	8910	8860
Direct Labor Hours Per Unit	2.1	2.1	1.7
Total Hours Needed	19908	18711	15062
Rate Per Hour	8.00	8.00	8.00
Total Direct Labor	159264	149688	120496	429448
Workings:
	Jan	Feb	Mar
Desired Ending Inventory:	=11300+(8700*70%)	=8700+(9000*70%)	=9000+(8800*70%)